US fails to renew tax cut

It looks like the US government is tumbling on fiscal support for the economy as has been expected from the result of the November election, boding ill for the country struggling in a fear of deflation.

Democratic measures to extend tax cuts for most Americans failed in the U.S. Senate on Saturday as Republicans -- and some Democrats -- blocked them because they did not also extend low rates for the wealthy.

President Barack Obama said he was disappointed with the vote, but indicated he was open to compromise on the tax cuts enacted under former Republican President George W. Bush, if certain conditions were met.

The Democratic plans -- to renew low tax rates for individuals with income up to $200,000 and for those making up to $1 million -- failed in procedural votes, as Republicans said low tax rates for the wealthiest should also be extended.

No Republicans backed the Democratic proposals, and a few Democrats voted against them.

Saturday's rare Senate votes were the latest skirmish in the battle over the tax cuts, which expire at the end of the year.

Obama and other Democratic leaders want to extend only the cuts for low- and middle-income Americans, contending the tax breaks for the wealthy would add too much to the yawning U.S. budget deficit.

Republicans, who dismissed Saturday's vote as a political stunt because the measures had been expected to fail, argue that raising taxes for the rich is a mistake that would cost jobs because wealthy Americans provide employment.

"Those provisions should have passed," Obama told reporters. "I continue to believe that it makes no sense to hold tax cuts for the middle class hostage to permanent tax cuts for the wealthiest 2 percent of Americans -- especially when those high-income tax cuts would cost an additional $700 billion that we don't have and would add to our deficit."

He said negotiators needed to "redouble" their efforts to ensure middle-class Americans did not face higher taxes on Jan. 1.

A White House official said Obama told Democratic congressional leaders on Saturday he was open to compromise but would oppose even a temporary extension if it did not include an extension of benefits for the unemployed and extension of other tax cuts that benefit middle-class families.